Arbitration Bill 2008: Second Stage.

Wednesday, 19 November 2008

Dáil Eireann Debate
Vol. 668 No. 1

Page of 141

Minister for Justice, Equality and Law Reform (Deputy Dermot Ahern):I move: “That the Bill be now read a Second Time.”

A major impetus for this new legislation was a strong sense that the time was right to ascertain what could be done to enhance Ireland’s ability to deliver on its potential as a venue for arbitration excellence. There also was recognition that our primary governing statute in the domestic area is more than 50 years old and that some modernisation in this area might not go amiss.

The key objective of the Bill is to create the legislative framework that will enable Ireland to capitalise upon the growing demand for non-judicial solutions for disputes arising within numerous spheres of activity, including commercial. International arbitration in particular has developed as a multi-million euro business and countries throughout the world are competing to attract this business to their capital cities.

Within Europe, the key players are Geneva, London and Paris. Research has demonstrated that important concerns for parties when it comes to deciding on where to arbitrate their disputes are legal considerations, convenience of location, the availability of expertise and neutrality. Ireland is well placed to build on the advantages which we have in all of these areas. In addition, we also have the benefit of being an English-speaking location and this is a positive factor of considerable importance in the international commercial sphere.

Ireland has three arbitration Acts and two different arbitration regimes. One regime applies to arbitrations which are purely domestic in character and is governed for the most part by the Arbitration Act 1954, with small elements drawn from the Arbitration Act 1980 and the Arbitration (International Commercial) Act 1998. As its name suggests, the latter Act governs arbitration which is both international and commercial in character. In addition, certain international obligations with regard to the recognition and enforcement of arbitration awards are governed by the 1980 Act. In summary, therefore, the legislative picture, viewed from the outside, could be perceived as being somewhat fractured and may hinder our goal of presenting ourselves as a modern venue that is suited to the business of arbitration with particular emphasis on the international dimension of this aspect of the law.

It is widely acknowledged that the gold standard for arbitration legislation, particularly in the commercial arena, is the model law on arbitration that was adopted by the United Nations Commission on International Trade Law, UNCITRAL, in 1985 and subsequently amended in 2006. To date, it has been adopted by more than 50 countries. While the model law was drawn up mainly with international commercial arbitration in mind, some countries, such as Scotland and New Zealand, have taken the decision to apply the it in the domestic arena as well. Ireland adopted the model law in 1998 for international commercial arbitrations only and, with a decade of experience behind us in respect of its operation, it seemed appropriate to take the next step to move to a single arbitration code that would be based almost exclusively on the provisions of that law.

[83]In general, even a cursory glance through the newspapers demonstrates that the profile attached to arbitration, and to some extent to mediation, has grown considerably of late. This suggests the introduction of this legislation is timely and that we have an opportunity to take advantage of what appears to be a growing trend.

Arbitration comes within the ambit of what is commonly referred to as alternative dispute resolution. In the past, there may have been a tendency to view the growing interest in such alternatives as suggestive of an implied criticism of the way in which the judicial system operates. However, there now is an increasing recognition that access to justice has a number of facets and that the differing elements which facilitate such access have the ability to complement and enhance each other in a mutually supportive way.

One obvious example of such support is to be found in the rules that were introduced in 2004 to facilitate the operation of the commercial list in the High Court. By virtue of these rules, proceedings now can be adjourned to allow the parties to consider whether recourse to a process of mediation, conciliation or arbitration might be appropriate to the issue in dispute. I understand that an increasing number of cases are being settled in this way, which has obvious benefits both for the parties themselves and for the State.

There also is an appreciation that not every dispute necessarily requires a judicial solution. In the commercial sphere in particular, the parties to a dispute may well have a long-standing business relationship they do not wish to jeopardise by engaging in traditional litigation or may wish, for reasons of business efficiency, to resolve their dispute outside the glare of unwelcome publicity. Again, recourse to a process such as arbitration carries with it certain inherent advantages, such as confidentiality, speed of resolution and finality, which may well commend themselves in the circumstances I have outlined.

I propose to go briefly through the various sections of the Bill and to dwell mainly on those aspects that introduce an element of change into our existing arbitration regime. I am conscious that some technical amendments may be required on Committee Stage and I already have asked my Department to begin the work necessary to identify the extent of those amendments. Against that background, Members may be assured I will listen carefully to any suggestions for improvement that can be made.

Part 1 of the Bill deals with a range of preliminary matters, including the important matter of definitions. I draw Members’ attention to the definition of “standard arbitration”. Essentially, this covers arbitrations which are not international and commercial in character. This is of significance in the context of those provisions of the Bill which apply exclusively to this kind of arbitration and I will deal with them in due course. Another important definition is that of “arbitration agreement”. This definition reflects changes introduced into the Model Law in 2006 which include clear provisions concerning the recognition of agreements in electronic form. Part 1 also contains the transitional provisions and provides for the repeal of the existing Arbitration Acts.

Part 2 of the Bill is its central core. Section 6 applies the model law to all arbitration proceedings that take place within the State. Hitherto, the law has only applied in respect of international commercial arbitration by virtue of the 1998 Act. Section 7 provides for a rule regarding the commencement of arbitration proceedings that would be relevant in, for example, a Statute of Limitations context. This is one of the areas where further technical modification may be required. Section 8 will allow the courts to make use of the preparatory work of the UN commission when interpreting any provision of the model law brought before it and should be a valuable tool in ensuring consistency of approach in the application of the law across a range of cases.

[84]Section 9 deals with the functions of the High Court which, as was the case in the 1998 Act, is designated as the court of competent jurisdiction for certain matters that arise under the model law. That law is predicated upon the idea that minimal court intervention is facilitative of the arbitration process. However, it also recognises that there are certain aspects of arbitration where a court role is both appropriate and necessary, for example, where the parties are unable to agree on the arbitrator to be appointed or where there is a need to make an application to set aside an award. Among the amendments made to the model law in 2006 was the inclusion of a number of new provisions dealing with interim measures and preliminary orders. The High Court will also have a role in the recognition and enforcement of such orders.

The High Court, by virtue of section 10, is also given the power to carry out the necessary obligations that may arise under Articles 9 and 27 of the model law. Article 9 allows a court to grant interim measures of protection before or during arbitral proceedings. Such measures would include the granting of interim injunctions and orders directed to the preservation of any goods that may be the subject of the dispute. Article 27 allows the court to assist in the taking of evidence. Under section 15 of the Bill, it is specified that such assistance may extend to arbitral proceedings occurring outside the State.

An important new provision in section 10 is that the court will no longer have the power to order security for costs in the context of arbitration. This will be a matter solely within the remit of the arbitral tribunal. Section 19 specifies the role of the tribunal in this area. In a similar vein, the court will no longer have the power to order discovery of documents in the context of arbitration. The vesting of these powers solely in the arbitral tribunal is generally seen as beneficial in developing Ireland as a centre of arbitration excellence, although it will be open to the parties, should they so agree, to specify that the court can intervene. Given that arbitration provides an alternative path to litigation, there is considerable evidence to suggest parties are anxious to avoid excessive court intervention. This is especially evident when it comes to enforcing an award.

Section 11 provides that there is to be finality in the court’s determination in respect of a number of applications. These include an application to stay a court action in a matter that is the subject of an arbitration agreement, to set aside an arbitral award and to recognise and enforce an arbitral award. In a new departure for our law, all of these applications will no longer be subject to appeal in a higher court.

Section 13 specifies that the default number of arbitrators, in the event that the parties do not agree otherwise, shall be one. This is a departure from the model law which specifies the default number as being three. The choice made is consistent with our existing arbitration practice and should assist in keeping the costs of arbitration to an acceptable level.

Section 14 deals with the power to administer oaths which, by virtue of the Interpretation Act 2005, also includes the power to allow evidence to be given either by declaration or affirmation. Given the inherent complexity of some arbitration disputes, it may sometimes happen that parallel proceedings involving a variety of parties may come into being. In such cases, it can be advantageous if the various proceedings can be consolidated or run concurrently. Section 16 deals with this area. However, because the authority of the arbitrator essentially derives from the agreement of the parties, consolidation or the holding of concurrent hearings cannot occur unless there is a willingness on the part of all parties.

Sections 18 to 22 supplement the model law in respect of a range of matters. They touch upon the power of the arbitral tribunal to award interest and costs and also deal with the liability of the arbitrator. It is important, particularly in the context of international arbitrations, that arbitrators are protected against unmeritorious litigation by aggrieved parties who might [85]be unhappy with the fact that an award was made against them. A provision restricting liability demonstrates commitment to the arbitral process and is a common feature of arbitration regimes in other jurisdictions. A final element in this mix relates to the enforceability of the arbitration award and its binding effect, critical elements within the overall arbitral process.

Sections 23 and 24 deal with various international agreements to which Ireland is already a party and replicate provisions already provided for in legislation dating back to 1954 and 1980, respectively. Chief among these agreements is the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This is generally regarded as the foundation of international arbitration and facilitates international trade throughout the world. It has been ratified by more than 140 countries. This broad range of support ensures arbitral awards will be readily enforceable in almost every jurisdiction of note. This year saw the 50th anniversary of the convention and Dublin which hosted the prestigious conference of the International Council for Commercial Arbitration in June was centre stage in demonstrating support for its aims and principles. The other agreements covered by these sections include the Convention on the Settlement of Investment Disputes between States and Nationals of other States, commonly referred to as the Washington Convention. This convention is primarily devoted to investor-state dispute settlement. The remaining agreements — the Geneva Convention and protocol — have largely been overtaken by the New York Convention, but retain their relevance for a limited number of countries.

Sections 27 to 29 deal with the position of State authorities which, as is the case at present, will be bound by arbitration agreements in much the same way as a private entity. They also deal with arbitrations that arise under statute. Further adjustment of these provisions will be required to take account of the broad range of arbitrations that arise under various Acts within the remit of a number of Departments outside the justice framework.

The final element of this central part of the Bill concerns small claims. Section 30, although couched in somewhat different terms, essentially maintains a key provision first introduced into our arbitration legislation in 1998. Broadly, it ensures the integrity of the existing small claims procedure that operates under the aegis of the District Court is retained in order that, regarding claims up to €2,000 in value, the jurisdiction of the court cannot be ousted by an arbitration clause.

I have referred to the concept of standard arbitrations. For the most part, it is desirable to have a single regime that applies, regardless of the nature of the arbitration. Nonetheless, it is appropriate that additional protections are available in cases that might not involve large-scale arbitrations, international and commercial in character. These matters are dealt with in Parts 4 and 5 of the Bill. While a distinction is made between consumer arbitrations and other kinds of arbitration, it is sufficient to say that, in broad terms, additional oversight by the courts can be availed of in these cases. For consumer arbitrations, the oversight is automatically available and can only be disapplied where there is agreement to do so once the dispute has arisen. For other arbitrations, the prior agreement of the parties is necessary for its application. “Oversight” means the retention of the existing case stated procedure and clarification as to when it is open to the court to remit an award for further consideration. In the latter case, the grounds for making an application are that new evidence is available that could materially alter the decision on the award.

A further element in standard arbitrations involves the specification of additional grounds for setting aside or remitting an arbitral award. These reflect existing case law and are additional to the grounds for setting aside laid down in the model law. What we are discussing is a fundamental error of law on the face of an award and evidence of procedural unfairness in the conduct of the arbitral tribunal.

[86]Since one cannot consider the specific sections of the Bill in isolation from the provisions of the model law to which it gives effect, I would like to touch briefly on some key elements of that law. I have mentioned the underlying philosophy of the model law which is that minimal court intervention works to the advantage of the arbitration process and ensures finality and certainty in respect of any award. Another key element enshrined in the model law is the idea of party autonomy. This is evident in the freedom that parties have with regard both to the number of arbitrators and the procedure for appointing the arbitrator or arbitrators. It is also to be found in the fact that the parties are free to agree on the procedure to be followed by the tribunal. This can result in the application of a given set of rules emanating from a recognised arbitration body such as the International Court of Arbitration. However, it also allows parties to agree on particular points of concern to them which will take account of the specific nature of the proceedings in which they are engaged.

By virtue of the model law, there will also be general application of the provision whereby the arbitral tribunal will be given the competence to rule on its own jurisdiction. This is a matter which has particular attraction for practitioners. With regard to the arbitration award itself, it should be noted that, unless otherwise agreed by the parties, that award is to state the reasons upon which it is based. This is somewhat of a new departure within this jurisdiction for arbitrations that are neither commercial nor international in character. However, the new rule is not likely to pose any significant problems in practice. From the point of view of the parties, it should introduce a measure of transparency into the arbitration process and act as a reassurance that proper standards are being adhered to.

While it is a significant modernising measure, the Bill inevitably involves a substantial amount of consolidation. From the brief outline I have given as to its content, it should be obvious there are provisions in the Bill that are equivalent to many of those already contained in the Arbitration Acts 1954 to 1998. However, in considering this Bill, the most important thing to note is that in applying the model law of the United Nations International Commission on Trade Law to all arbitrations, Ireland is putting itself to the forefront in terms of having in place a modern and rigorous arbitration code which is fully in tune with best international practice. By taking this route we are providing ourselves with a single reference point for all arbitrations. I hope this will prove to be an attraction when it comes to doing arbitration business in this jurisdiction.

Alternative dispute resolution in general is clearly a growth industry and the Bill will answer a demand that exists, particularly within the international commercial community, for increased options in this area. Ireland, by virtue of its legal system which is based on the common law, its accessibility and its language regime would seem to be well placed to capitalise upon that demand.

I am confident the new Arbitration Bill will provide the necessary legal underpinning for the future development of Ireland as a leading arbitration centre. It is an undeniable fact of commercial life that where there is investment, particularly of a substantial kind, there are likely to be disputes to which considerable complexity can attach. In this environment, arbitration allows for solutions which maximise privacy, provide the requisite flexibility and enable arbitrators whose skills and experience match the dispute to be chosen. There is also the all-important guarantee of enforceability.

This is a somewhat technical Bill but it is nonetheless an important measure that may help in the delivery of arbitration business to this country. I commend it to the House.

[87]Deputy Michael D’Arcy:This Bill makes a number of changes to the law on arbitration in Ireland. In particular it makes improvements to the 1998 Arbitration Act which introduced an internationally recognised model law for all international commercial arbitration in Ireland. The new Bill also ensures that any recourse to court will be speedy and will avoid unnecessary costs. It also removes the possibility of court orders which might be unhelpful to the arbitral process such as orders for security for costs and discovery.

These are the words used by Mr. Colm Ó hOisín, SC, chairman of the Bar Council’s arbitration and alternative disputes resolution committee, in an article in The Irish Times. He proceeds to state:

Significantly the new Bill also extends the model law to domestic arbitrations. Up to now it had been governed by an outdated law which was no longer in sync with modern procedures.

The Arbitration Bill is a very welcome development as it incorporates international best practice into Irish law. The new Bill is a very important positive step in establishing Ireland as an attractive option as a neutral third party country venue for international arbitration.

It is important to note that arbitration forms part of the services industry, which we hope will develop and make a major contribution to our GDP. When one considers the downturn in the economy and the current lack of finance, it is clear arbitration could give rise to huge benefits in the future. I spoke with a senior partner in one of the major firms who informed me that his company was obliged to announce that its 15 trainees will be laid off before Christmas. For whatever reason, the legal profession has not garnered a great deal in the way of kudos in the past. It must be noted, however, that it, along with other professions, is feeling the pinch in the current economic climate. When one considers that 750 people are currently studying for FE1s with the Law Society of Ireland, it is clear that legislation that will underpin Ireland’s attempts to become an important centre for arbitration must be put in place.

In the article to which I refer, Colm Ó hOisín states:

Many international arbitration disputes involve multi-million euro amounts. Choosing Ireland as the arbitration venue for these disputes is a vote of confidence in the quality of our government, business and legal structures. Ireland is a neutral, English-speaking venue which has a common law system and an evolving, strong legal framework which is attractive for dispute resolution.

The West’s legal system has as its basis the English system, which has been in place for centuries. If we get the legislation right and companies and other countries can see Ireland’s value as an arbitration centre, we will prosper. We must ensure the law we put in place is good, progressive and fair. In that context, this legislation provides a template that will prove beneficial in the future.

In his article, Colm Ó hOisín also states:

Hosting the arbitration of these disputes has many significant economic, legal and business tourism benefits.

Nearly 1,000 overseas companies have made Ireland their European base, in many sectors such as finance, information technology, pharmaceuticals and other services. We have a wide range of translation and stenography services, which are another advantage to our location.

He goes on to observe:

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The courts also support and encourage arbitration. For example, the Commercial Court provides a fast track system for dealing with commercial litigation and can potentially be used in arbitration matters. The development of a purpose-built centre for arbitration and dispute resolution would further enhance our ability to attract this business. International best practice is to have such centres and, in order to compete with London, Paris and New York, Ireland must also offer similar facilities.

I understand a significant case will soon be coming before the High Court. It is important to get legislation right in the first instance and not be obliged to revisit it. If we do so, we will enhance our reputation on the international scene.

Mr. Ó hOisín’s article continues:

Ireland Inc as a brand has had worldwide success. Many leading Irish people have figured on the international economic and political stage and this helps attract people from overseas to Ireland. This business would greatly enhance our economic and legal standing. It would also encourage domestic alternative dispute methods, which can only be of benefit in repairing fractured business relationships.

Many sectors in the Irish economy are internationally focused and have made inroads into markets abroad. The Irish legal services community has been more domestically focused up to the present.

Dublin ICCA 2008 [to which the Minister referred] was the biggest international arbitration conference ever. It has generated significant goodwill to Ireland. This coupled with the new Arbitration Bill and the various initiatives prompted by the conference, should allow us to achieve the goal of establishing Ireland as a premier centre for international dispute resolution.

I referred to arbitration and dispute resolution. It is important we get this right. There is nothing as annoying as a new Member of the House as the possibility that this legislation will have to be improved upon. We should ensure, therefore, we get it right on the first occasion.

Section 9 provides that the High Court is to be the court specified under Article 6 of the model law for the performance of certain functions of arbitrational assistance and supervision. I do not intend to speak about all of the matters referred to by the Minister. However, there are a couple of issues in regard to small claims that are important. Far too often small claims clog up the system. I am sure the international dispute resolution procedure of which I am speaking will deal not with small claims but with international claims of significance.

Section 30 provides that the Bill shall not apply to an arbitration agreement that relates to a claim which does not exceed the monetary limit for small claims in the District Court, currently €2,000. Such a claim, if not individually negotiated by the parties, will be deemed to be an unfair term for the purposes of the European Communities (Unfair terms in Consumer Contracts ) Regulations 1995 and 2000. It is important we ensure small claims cases do not clog up the courts or the arbitration process.

Section 34 deals with special oversight and preserves the power of the arbitrator to state a case for the appropriate court as to an award. Also, it allows a party to an arbitration to make an application to that court seeking that an award be remitted to the arbitrator on the grounds that new evidence has emerged which is likely to materially alter the decision in regard to that award or seeking a direction that the arbitrator state a case for the decision of the court. [89] Arbitration can be and is hard, given the requirement for privacy and confidentiality on the part of the parties involved and the arbitrator. Our attitudes may vary.

The Minister referred to section 11 which provides an alternative path to litigation. There is, as the Minister stated, evidence to suggest the parties are anxious to avoid excessive court intervention, which can only be welcomed. Section 11 further states there is to be finality in regard to the court’s determination in respect of a number of applications. These include an application to stay a court action in a matter which is the subject of an arbitration agreement; an application to set aside an arbitral award or an application to recognise and enforce an arbitral award. The Minister has stated it is a new departure for our law that all these applications will no longer be subject to appeal to a higher court, thus giving to the arbitrator a court of final appeal.

As I stated, it is important we get this right and that we ensure no confusion arises that may present as a flaw in the legislation. Perhaps the Minister will clarify this matter. It may be that I have not read or interpreted the section correctly. We must ensure we do everything correctly.

Deputy Pat Rabbitte:I welcome the taking of Second Stage of the Arbitration Bill 2008.

Alternative disputes resolution has been with us for a long time and is essentially based on the prior agreement of the parties to resolve their differences in a manner that conforms to the fundamental principles of justice. Alternative dispute resolution processes have emerged in the context of delays in the courts system. After a fashion, the Small Claims Court is a mediation process for certain consumer disputes, while the Family Mediation Service provides an important alternative resolution facility in the context of family conflicts.

Up to now, model law has applied only in regard to international commercial arbitration. The Bill will apply the United Nations Commission on International Trade Law, UNICTRAL, model law on international commercial arbitration to all arbitrations that take place within the State. The Law Reform Commission in its report makes plain that “alternative” in “alternative dispute resolution” should not be seen as preventing the court process “from continuing to play a positive role in resolving disputes by agreement”. The commission’s view is that an integrated civil process should include a combination of alternative dispute resolution processes such as mediation and conciliation and the court-based litigation process. On the other hand, many practitioners seem to favour minimal involvement by the courts.

Whether the objective that Dublin might one day rival Geneva, London and Paris as a venue for arbitration excellence will be realised, I cannot say. However, there is no reason we should not aim high. There is no doubt that Ireland has certain advantages and no reason we should not market them to optimum effect. Deputy D’Arcy focused on this important dimension. It is my understanding that the Irish branch of the Chartered Institute of Arbitration, founded in 1982, has approximately 800 members drawn from diverse backgrounds and a wide range of professional qualifications.

The extent to which alternative dispute resolution is available to resolve disputes in many walks of life and its legal authority to do so may surprise many outside those sectors where they are in regular use such as in the construction industry. Consumer arbitration schemes offer a great many a means of resolving disputes which arise from the purchase of goods, holidays or the supply of services to consumers. Examples include contracts for the supply of holidays under the Package Holiday and Travel Trade Act 1995 and the sale of motor vehicles by members of the Society of Irish Motor Industry. These arbitration schemes offer the consumer a speedy, inexpensive, final, legally enforceable resolution of their dispute and, in addition, [90]help to develop an awareness of, and encourage acceptance of, arbitration as a dispute resolution process. In July this year the Law Reform Commission produced a broad ranging consultation paper on alternative dispute resolution. The paper covers all aspects and techniques of dispute resolution outside the courts.

The Arbitration Bill 2008, the first comprehensive review of arbitral legislation in this country since the original Act in 1954, will affect dispute resolution in a decisive way. I am aware that the Irish branch of the Chartered Institute of Arbitrators has welcomed the Bill in general and supported the proposal to modernise the legislation by means of a consolidated Act to replace the existing three Acts and to extend the UNCITRAL model law to govern not alone international arbitrations but also domestic ones. However, improvements could be made in some areas and a more detailed examination of some of the sections of the Bill is warranted. The Bill contains 36 sections, a number of which appear to have been taken word for word from the 1954 Act. I ask whether some sections require updating or, in some cases, could perhaps be omitted from the Bill. For example, section 29 simply repeats section 5 of the 1954 Act and relates to industrial relations matters which are excluded from the operation of the Act. I can see why this might have been considered desirable in 1954 which was shortly after the establishment of many of the State agencies governing this area such as the Labour Court, but I would like to hear from the Minister why he considers the same considerations apply today. Given the long delays in arranging hearings at the Employment Appeals Tribunal and the fact that ACAS in the United Kingdom has introduced the option of private arbitration, this exclusion should be examined. I say this against a background in which lawyers have become commonplace in situations where industrial relations executives and trade union officials originally did the business and an expanded workforce in which many employments are not trade union organised.

As regards court ordered arbitrations, section 31 is a literal transposition of sections 49 to 53 of the 1954 Act. My advice is that this power is seldom, if ever, used and, therefore, I ask the Minister to explain why it ought to be reinserted in the new legislation.

I have referred to the sections of the Bill which deal with consumer arbitrations. These are schemes for the resolution of disputes which arise from the purchase of goods or the supply of services to consumers. These provisions potentially cover a great many people. The arbitration schemes offer consumers a speedy and relatively inexpensive final resolution of their disputes, in addition to developing an awareness and encouraging acceptance of arbitration as a dispute resolution process. However, the effect of section 30(1) which is not directed solely at consumer arbitrations will be to limit the number of arbitrations which take place and retard the acceptance and development of arbitration. I would like to learn from the Minister the reason arbitration should not be permitted, unless the amount in dispute is higher than the jurisdiction of the Small Claims Court. If a taxi driver who is not a consumer for the purposes under discussion is in dispute for an amount less than €2,000, the only remedy available to him or her is litigation. Perhaps the purpose of the section is to avoid duplication but it is not readily apparent why disputes that come within the remit of the Small Claims Court should be excluded. I ask the Minister to outline why this subsection should be retained.

While other measures provide protection for consumers, the practical application of the provisions of sections 34 and 35 may be open to abuse. The protection which the Government wishes to provide for consumers could be arranged in a more straightforward manner, thereby allowing for more streamlined legislation. In addition, there is considerable support for mod[91]ifying or even omitting section 32 which deals with the additional powers of the court to set aside or remit awards.

The UNCITRAL model law on international commercial arbitration already governs domestic arbitration in a number of countries, including Germany, Kenya and New Zealand, and much of the model law restates contemporary Irish law on domestic arbitration. I welcome, in particular, the decision to introduce into Irish arbitration law the powers of arbitrators to determine their own jurisdictions, amend and interpret their own awards and terminate cases for want of prosecution or on grounds of delay, as well the default requirement that all awards should be reasoned. However, the Bill will require further revision in specific areas to avoid anomalies caused by the fact that the model law is tailored specifically to international arbitration. The most obvious example of this arises in respect of Article 34 of the model law which allows the courts to set aside an award on stated grounds and Article 36 which allows the courts on almost identical grounds to refuse to enforce an award. This, in effect, gives a party resisting an award two opportunities to mount a challenge. That may be necessary in international arbitration where the enforcing court and the set-aside court may be in different jurisdictions but it is not required in domestic arbitration. In contemporary Irish domestic arbitration law a party with a grievance about the fairness of the arbitration or the process leading to the award must bring a challenge to the award within the time limits specified in the rules of court. The party cannot thereafter resist enforcement of the award, unless the court extends the time for challenge, except where the award was made without jurisdiction or where it has already been performed. The model law will, therefore, make it much easier to resist an arbitrator’s award in domestic arbitration. This might be redressed by a provision in the Bill which would stop a party from resisting enforcement under Article 36 on grounds already rejected in a challenge under Article 34 or by a provision limiting the grounds for refusal of enforcement under Article 34 in domestic arbitrations.

Some practitioners question the necessity of applying to a court to enforce a domestic arbitration award. I note the very definite view taken on this issue by the Law Reform Commission. Under the law, if one wishes to enforce a domestic arbitration award, it is necessary to apply to the Master of the High Court on affidavit, even if the award is not being challenged. The other party to the arbitration is entitled to resist the application and this can lead to delay and expense. A simple procedure should be put in place, whereby a domestic arbitration award which has not been challenged under the provisions of the legislation providing for a challenge could be converted into a court judgment through the central office and without formal application to the court. If a defendant does not defend summary proceedings for recovery of a debt, the plaintiff is entitled to obtain judgment through the central office. Why should the recipient of an award in a domestic arbitration be in a weaker position? Similarly, it is the view of practitioners that the new evidence ground for remission under the special oversight provision in section 34 should have a time limit.

The possibility of abuse also arises in situations where parties to arbitration have unequal bargaining powers. This arises in sections 12, 18 and 20. If there is an unequal balance between a consumer and, for example, a multiple store, the latter ought not be facilitated in causing the consumer to jump through a number of hurdles, not least where expenses are involved. In that context, it must be borne in mind that arbitration provisions are often included in the standard forms of contract or terms and conditions prepared by one of the parties. It is important that such a party should not be in a position to protect itself against its own wrongdoing by providing for the non-payment of interest or costs to a successful claimant.

[92]In many conflicts speed can be of the essence. Alternative dispute resolution facilitates early settlement of disputes. As the Law Reform Commission consultation paper notes, “early settlement can be both financially and emotionally advantageous to the disputant”. It also notes that “an important relationship can be repaired and maintained, something which may be at risk in adversarial litigation”. A settlement on the steps of the court “often depends on the strength of the legal rights-based arguments” and, as we know, may follow on from an already very expensive process, including the cost of discovery. The Law Reform Commission paper argues that alternative dispute resolution “must be seen as an integral part of any modern justice system” and records the view of the British Master of the Rolls, Sir Anthony Clarke, who said in May 2008, “It must become such a well established part of it that when considering the proper management of litigation it forms as intrinsic and as instinctive a part of our lexicon and of our thought processes, as standard considerations like what, if any, expert evidence is required.” While we may yet have some distance to go before these are the instinctual responses, the Bill should bring us closer to that objective.

Deputy Arthur Morgan:I welcome this opportunity to express my broad support for the Bill. The Bill is a welcome development to ensure arbitration will continue to grow as an alternative to court proceedings in commercial disputes and to facilitate Dublin and Ireland in becoming an international centre for dispute resolution.

A number of proposals in the Bill will improve our existing arbitration law. The UNCITRAL model law on international commercial arbitration which until now had only applied to international arbitration will be extended to domestic arbitration. The process of streamlining Irish law with international standards is a welcome development and we will be supporting that element of it. The provisions in section 32 which provide for additional grounds for the High Court to set aside arbitral awards in domestic arbitrations are welcome. The new grounds to set aside an arbitral award where there is a fundamental error of law or in case of unfair procedure are a necessary extension to ensure parties in commercial arbitration have proper recourse to the courts.

Some of the criticisms of the arbitration process such as it being costly and cumbersome have been addressed in the Bill. Section 10 which provides that the High Court will not make any order for security for costs and an order of discovery, unless agreed by the parties, should have the effect of avoiding unnecessary costs. I certainly hope that is the case.

The section dealing with consumer arbitration deserves careful consideration. While arbitration is well established in the travel and motor trades, as mentioned by the previous speaker, through bodies such as the Society of the Irish Motor Industry and the tour operators holiday package scheme, in other areas alternative dispute resolution is in its infancy. It is widely acknowledged that there can be great inequality in bargaining power in consumer contracts. Dispute resolution is often chosen by the company whereas the consumer is likely to have a limited knowledge of the process of alternative resolution. For these reasons, consumers need added protection to ensure consumer arbitration procedures are fair, effective and expeditious.

I support the proposal that provides for the mechanism, whereby arbitrators shall state a case to a court on a question of law and for an arbitral award to be remitted if new evidence emerges. I also support section 30(2) which deems an arbitration term as an unfair term under the European Communities (Unfair Terms in Consumer Contracts) Regulations 1995 and 2000 if it has not been individually negotiated by the parties. However, I am concerned about the limitation of its application to claims under the Small Claims Court threshold of €2,000. I [93]support the previous speaker’s comments in that regard. All arbitration terms in consumer contracts should be deemed unfair if they have not been individually negotiated by the parties and a consumer should only be bound by an arbitration clause after a dispute has arisen. It should be possible for consumers in smaller transactions to choose arbitration in the aftermath of a dispute. This would ensure consumers could make an informed decision to proceed through the courts or in the alternative to pursue any claim through proper dispute resolution bodies. I will, therefore, be recommending an examination of the wording of section 30(1).

With more than 700 members in the Irish branch of the Chartered Institute of Arbitrators, it is clear that businesses are choosing arbitration as an alternative to court proceedings. It is necessary that arbitration law in Ireland provide a clear, decisive and effective process. The provisions in the Bill, by and large, will succeed in doing this. There will also be considerable economic and tourism benefits if Dublin becomes a major centre of dispute resolution.

While I support the Government’s commitment in developing the State as a global venue for international arbitration through reform of our arbitration law, there are other important elements for attracting international arbitration to the State which have been undermined to a degree by the Government and to which attention should be drawn. Colm Ó hOisín, chairman of the Bar Council arbitration and alternative dispute resolution committee, identified in an article in The Irish Times our neutrality as an advantage for the State as a third country in international arbitration disputes. The Taoiseach emphasised our neutrality when addressing the International Council for Commercial Arbitration 2008 conference at the beginning June. Clearly, the promotion of our neutrality is an attractive feature for businesses from non-aligned countries such as India. However, the Government’s support for US military aeroplanes landing at Shannon Airport and enhanced defence co-operation in Europe undermines this assertion. If we are to make a convincing case and use our neutrality to attract international dispute arbitration to Dublin, we must have an unambiguous position. My party will continue to call for a halt in the use of Shannon Airport by the US military in its war efforts in Afghanistan and Iraq. We will also oppose any development of a common EU military policy through European treaties. The development of international dispute resolution illustrates that our neutrality is something that can benefit us both politically and economically. It is the responsibility of the Government to safeguard our neutrality, not to undermine it. While I broadly welcome many of the proposals in the Bill, the Government must also re-engage with our policy of neutrality if this is to be recognised as a genuine neutral third country venue for international dispute resolution.

7 o’clock

To some degree, the process of recognising Ireland as a potential arbitrator in disputes has commenced. There have been instances where people from the State have been invited to meet parties abroad. There is strong recognition internationally of Ireland’s potential to play a significant role in this regard, not least following what we hope will be a successful resolution of our own differences and disputes on the island and with our neighbouring island, Britain. I hope this can be built upon. We have seen significant progress this week in further building on the Irish peace process. We look forward to developing its potential to ensure we maximise the benefit, not just for the sake of building an economic advantage for Ireland, but also in achieving world peace, clearly a laudable objective that goes beyond any economic desire we might legitimately have. I hope the potential can be tapped into through the introduction of the Bill. While some of its provisions cause me concern, nevertheless I welcome it as a useful step forward. I look forward to discussing it on Committee Stage.